Saturday, January 03, 2015

7 Simple Tips To Save Money

Saving money is easier said than done. Especially in the context that we live in, here in Singapore. The cost of living in the past 5-10 years have literally shot through the roof. I personally witnessed the price of my daily cup of coffee rising from ninety cents in 2009 to a dollar forty in 2014.
Such an environment creates a real challenge to saving and this is evident in young adults and working professionals, like myself. Thus, i wanted to share some little steps you can take to help you on your own journey, the journey to retirement and better financial life.

1) Separate Your "Expense" Account

Most people spend and save from the same account. Whilst this may seem perfectly normal, it is not advisable if you want to be serious about saving money. Maintaining a separate expense account from your savings account, will give you a better sense of control and discipline.
Typically, this can be done by creating a monthly standing instruction to transfer X$ amount of your nett (take home) pay to the savings account. Depending on how big a spender you are (and how much debt you have), I would suggest to save at least 30-35%* of your take home pay.

There are two main benefits of separating your accounts. Firstly, you will not be tempted to spend more than you have budgeted as 'expense'. Secondly, you will be able to enjoy the various interest rate promotions on your savings account. By letting your savings grow, you will enjoy the amplifying effect of compounding! Time, interest rate and savings are the main elements for compounding to work. No matter how tempting it may be, it is important not to dig into your savings account unless necessary.

Interest Rate on Compounding

Example of Savings Accounts (With attractive Interest Rates):

OCBC Bonus+UOB UniplusSCB eSaver

* I personally save about 35% of my take home pay

2) Make Use of Credit Cards

Credit Cards can be a boon or bane. With proper financial discipline, believe it or not, it can help you to save money. Using a credit Card the 'right way' will not just allow you to track your expenses (see Point 5), but also return some decent rewards on your spending (Check out my post on the Best Rebates Cards).

The trick to using Credit Cards is to exercise discipline, pay your bills on time and spend within your means. With a little prudence, you will be surprised at the long term savings of using the right credit cards.

Here are some credit cards which gives me the best cash backs (or rebates):

3) Avoid Expensive Restaurants or Cafes

Eating out, especially at restaurants, can really add to your expenses. After all, unless you have an appetite of a mouse, having a meal at a restaurant for two would easily cost about 40-50$. You can save significantly by either having home cooked meals or eating simple, yet delicious hawker fare. Take a look at some of the best hawker fare in Singapore here.

Of course, i am not advocating being a Grinch. Having the occasional dine-out would certainly not burn a hole in your wallet. Other alternatives to this tip include packing breakfast or lunch to work.

4) Go Local (For Your Daily Coffee Fix)

Local Cuppa

8 Years ago, when i first started work, i drank a cup of Starbucks latte daily. Unfortunately, only when i started to track my expenses, did i realise that this was a major expense!. I was shocked to learn that i had been spending about $1400 per year on coffee! (About 6$ Per Grande Latte).

Ever since then, i adapted my taste buds to the better tasting and cheaper local coffee (AKA Kopi). At 1.30$ (Fun Toast) per cup, it would only cost 312$ per year!. As you can see, the savings are substantial. I had literally saved a 1000$ each year!

I know of friends who would stretch their savings even more by simply drinking the 3-in-1coffee available from their office pantry. This is also an alternative to the Latte, but for the time being, i will be sticking to my favourite coffee from Fun Toast.

5) Track Your Expenses

This tip goes hand-in-hand with spending using your Credit Card. Personally, i use an excel spreadsheet to track my monthly expenses (via the monthly iBanking statements).This gives me a feel of how much i have spent in the month vis-a-vis the amount i have set aside in my expense account. At the end of the month, a dollar not spent, is a dollar saved! :)

There are other alternatives to the excel spreadsheet tracker, like using free iOS or Android apps that works on the same concept. Whichever option you choose, do keep in mind that the motivation for tracking is not to penny pinch, but rather to be aware of your spending. One of the first steps to good financial health is to be aware of your major spending. After all, Money does not simply 'disappear' right ?.

6) Entertainment

It Will Love You Back

Whilst i am not one who goes clubbing or drinking, i do have friends who spend mind-blowingly large amounts of money on drinks every week. I often hear them justify that it is a necessary expense, a form of entertainment and fun.

I am not going to judge. But to be honest, this is where the bulk of your money gets wasted away.

To cut down on this expense would mean to have a change in lifestyle. The first step would be to limit the number of drinking sessions per week. Besides being wallet friendly, cutting down on alcohol consumption does have proven health benefits as well. Your liver will thank you for it ! :)

7) Take Public Transport

Let's face it, one of the biggest pitfalls to saving in Singapore is the ownership of a car. If you haven't already owned a car, then this tip is for you!.With *COEs still at a relative high ($65,889 is Dec. for CAT A), it makes perfect sense to delay buying a car - at least until there is a REAL need for it. Taking public transport (MRT/BUS) will not be most convenient but at least it would allow you to be debt free and put the money that would otherwise be spent on road tax, petrol and insurance into your savings.
* COE - CERTIFICATE OF ENTITLEMENT- A COE represents a right to vehicle ownership and use of the limited road space for 10 years.
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With these 7 little tips and tricks, i hope that you were able to grow your savings. As the saying goes, "A journey of a thousand miles must begin with a single step". Take the first step towards saving and you will be rewarded in due time!